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Submitted by Michael McDonald via OilPrice.com,

Economics 101 tells us that prices in a free market are set by the interaction of supply and demand. The world oil markets have gotten a graphic lesson in that truth over the last year, as the dramatic surge in US oil production has met stagnant demand. This, in turn, has pushed down spot prices by nearly half.

The recent uptick in oil prices, however, has buoyed hopes among market watchers that a strong oil price rally is in order. Unfortunately economics is working against these investors.

Gasoline demand is starting to rise as prices have reached multiyear lows. As it continues to rise, motorists around the world will begin to suck up extra all of that extra supply. That would normally lead to a strong rebound in prices.

But unlike the 2008 fall in oil prices, which was driven by a collapse in demand across the industry, the current price quandary is supply based. And the massive expansion in supply is overwhelming the newfound demand. That may make it more difficult for prices to bounce back.

Over the past few years exploration companies have unlocked extraordinary new unconventional resources like the Alberta oil sands and US shale, leading to a historic increase in supply. More impressive is the fact that even at today’s low prices, there is likely to be some small production increase in 2015.

That is because many firms are looking at new efficiency improvements that should increase oil production while lowering production costs. Statoil, for example, says it has lowered its per well drilling cost by $1 million or roughly 22%, and it can now drill wells faster than ever before. The rise in efficient oil production has led to more than half of the country’s rig fleet being idled with many firms now drilling multiple wells at a time rather than single ad hoc wells. These innovations have led to a 20% fall in the per barrel cost of production according to some industry executives, and more improvements are still to come.

As a result, the EIA is forecasting oil production will rise to 9.2 million barrels of oil per day for 2015 versus 8.7 mopd in 2014. That’s right, an increase in oil output this year even though prices have cratered.

It should not be a surprise, in light of all this, that many industry experts are pretty grim about the future of oil prices, including recent studies announcing that it may be a decade or more before the price of oil hits $100 a barrel again. With drillers able to profitably produce at ever lower price levels, the ceiling on oil prices could remain low for quite some time. We are in a new era.

The new oil price environment will take some adjustments and it will definitely result in economic pain in some areas. At the end of the day, oil companies are starting to get used to the idea of lower prices and they are adapting to the new reality. Now investors need to do the same.








While many eagerly await the day when China will finally reveal its latest official gold holdings, a number which when made public will be orders of magnitude higher than its last 2009 disclosure of just over 1,000 tons, or less even than Russia, China continues to plough ahead with agreements and arrangements to obtain even more gold in the coming years.

Exhibit A: two weeks ago, Xinhua reported that China National Gold Group Corporation announced it has signed an agreement with Russian gold miner Polyus Gold to deepen ties in gold exploration. The companies will cooperate in mineral resource exploration, technical exchanges and materials supply, the largest gold producer of China said.

Polyus Gold is the largest gold producer in Russia and one of the world's top 10 gold miners.

 

The agreement between the two gold miners is one of many deals signed between China and Russia in energy, transportation, space, finance and media exchanges during President Xi Jinping's visit to Russia from May 8 to May 10.

 

"China's Belt and Road Initiative brings unprecedented opportunities for the gold industry. There is ample room for cooperation with neighboring countries, and we have advantages in technique, facilities, cash, and talents," said Song Xin, general manager of China National Gold Group Corporation.

In light of such developments, it is little wonder there has been increasing chatter in recent months that Russia and China are setting the stage for a gold-backed currency, in preparation for the day the Dollar reserve hegemony finally ends (a hegemony whose demise is accelerating with every incremental physical gold repatriation such as those of Germany, the  Netherlands, and now Austria).

And now, Exhibit B: overnight Xinhua also reported that a gold sector fund involving countries along the ancient Silk Road has been set up in northwest China's Xi'an City during an ongoing forum on investment and trade this weekend. (read more about the "New Silk Road" which could change global economics forever here). The fund, led by Shanghai Gold Exchange (SGE), is expected to raise an estimated 100 billion yuan (16.1 billion U.S. Dollars) in three phases. The amount of capital allocated to nothing but physical gold purchases (without plans for financial paper intermediation a la western ETFs) will be the largest in the world.

The billions of dollars in allocated funding will come from roughly 60 countries that have invested in the fund, which will in turn facilitate gold purchase for the central banks of member states to increase their holdings of the precious metal, according to the SGE.

As Xinhua notes, China is the world's largest gold producer, and also a major importer and consumer of gold. Among the 65 countries along the routes of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road, there are numerous Asian countries identified as important reserve bases and consumers of gold.

"China does not have a big say in gold pricing because it accounts for a small share of international gold trade," said Tang Xisheng of the Industrial Fund Management Co. "Therefore, the Chinese government seeks to increase the influence of RMB in gold pricing by opening the domestic gold market to international investors."

As a reminder, the reason why China has been aggressively building out and expanding its Shanghai Gold Exchange is precisely that: to shift the global gold trading center away from London (and certainly the US where only paper gold is relevant these days) and to its own native soil: China's ambition is nothing short of becoming the world's new gold trading hub.

In other to do that, it is already setting up the regional infrastructure to facilitate such a goal: according to Tang, the fund will invest in gold mining in countries along the Silk Road, which will increase exploration in countries such as Afghanistan and Kazakhstan.

The good news for China is that with the BIS and virtually all "developed" central banks in desperate need of keeping the price of gold as low as possible while they debase their own paper currencies to unprecedented levels over fears of faith in fiat evaporating, China's gold fund will be able to procure gold for its members at a very reasonable price until such time as the lack of physical gold supply can no longer be swept away by mere paper shorting of the yellow metal.








The default countdown is about to go under 10 days and it is becoming increasingly apparent that both Greece and its creditors have had enough.

Months of tense negotiations have gone nowhere and yielded exactly nothing and it now looks like PM Alexis Tsipras and FinMin Yanis Varoufakis may be willing to miss a June 5 payment to the IMF if it means proving they are serious about keeping their campaign promises and forcing the troika to the bargaining table. The implications of a missed payment aren’t entirely clear but Athens is keen to predict the worst as it tries to squeeze concessions from creditors. Bloomberg has more:

A day after Prime Minister Alexis Tsipras said Greek society can’t absorb any more austerity measures, Finance Minister Yanis Varoufakis said his government has met the euro area and IMF three-quarters of the way, and that it’s up to creditors to cover the remainder.

 

“Greece has made enormous strides reaching a deal, it is now up to the institutions to do their bit,” Varoufakis said Sunday on BBC’s Andrew Marr Show. “It is not in their interests as our creditors that the cow that produces the milk should be beaten into submission to the extent that the milk will not be enough for them to get their money back”...

 

German Finance Minister Wolfgang Schaeuble, meanwhile, signaled there isn’t much wiggle room after Tsipras’s government committed to policy changes in return for aid in a euro-area accord on Feb. 20.

 

“That is the condition for completing the current program,” Schaeuble said in a Deutschlandfunk radio interview aired Sunday. “The problems are rooted in Greece. And now Greece does have to fulfill its commitments.”

 

Some members of Tsipras’s Syriza party advocate defaulting on loans rather than backing down from the anti-austerity policies that swept it to power in January even if that leads the country out of the euro.

 

Greece doesn’t have the money, and won’t pay what it owes the IMF in June, Interior Minister Nikos Voutsis said in a Mega TV interview on Sunday. Spiegel Online on April 1 cited Voutsis as saying Greece should delay an April 9 payment to the fund, which was made.

 

“We’ve done remarkably well for an economy that doesn’t have access to the money markets to meet our obligations,” Varoufakis said. “At some point we will not be able to do it.”

 

“Once you are in a monetary union, getting out of it is catastrophic,” Varoufakis said. “It would be a disaster for everyone involved. It would be a disaster primarily for the Greek social economy but it would also be the beginning of the end of the common currency project in Europe, whatever some analysts might be saying.”

And "whatever some analysts might be saying", Greeks are now suffering mightily, as the €22 million per day hit to the economy has now bankrupted the country's hospitals which have reportedly run out of painkillers and sheets. Here's The Independent:

Greek hospitals have run out of supplies such as painkillers, scissors and sheets as budget cuts have left the health service unable to provide even basic provisions for operations and medical procedures…

Huge cuts to the healthcare budget, amid the economic turmoil which made millions unemployed, have left than 2.5m Greeks uninsured, up from 500,000 in 2008..
healthcare spending has fallen by 25 per cent since 2009, creating shortages of the most basic surgical equipment and leaving too little money to pay nurses' salaries.
Reports have surfaced of patients being turned away from hospital because there was no meter to measure their high blood pressure, while others have had to do without painkillers during medical procedures. One patient was even asked to bring their own sheets to hospital.
A trainee surgeon at KAT, a respected state hospital in Athens, said the situation was at “breaking point”.
“There is no money to repair medical equipment, no money for ambulances to use for petrol, no money to hire nurses and no money to buy modern surgical supplies."
Meanwhile, Tsipras is steadfastly refusing to compromise on the now ubiquitous "red lines" and the most outspoken austerity advocates look to be entrenching themselves even further as the following quote from German FinMin Wolfgang Schaeuble makes clear:
Greece committed itself to the fulfillment of this program on Feb. 20 and therefore we don't need to talk about alternatives.
Clearly, the end game is approaching although it's till unclear what form it will take. The idea that a developed country cannot provide basic emergency medical care because it is in poor standing with the institutions that print a fiat currency is patently absurd and simply isn't tenable meaning that one way or another, this 'situation' will resolve itself in the coming weeks, an event which will put Europe's broken bond markets to a rather difficult test.







The US dollar's recovery last week may not get the kind of fundamental support that medium and long-term investors would like to see to raise the confidence that the two-month correction has run its course.  

 

Owing to a greater deterioration of net exports and a smaller than expected inventory build, Q1 GDP is likely to be revised sharply lower.  The 0.2% expansion may turn into a 0.8-1.0% contraction.  Although it is backward looking, especially given that the second quarter is two-thirds when the revision is announced, it does have an important implication.

 

It means that rather than raise rates in June, as many of us had previously anticipated, the Federal Reserve will have to cut its GDP growth forecast for the entire year.  In March, the Fed's central tendency forecast, which excludes the three highest and three lowest forecasts was 2.3%-2.7%.  It is possible that growth in the first half is flat or barely positive.  This means that even if growth in the second half averages 3%, GDP for the entire year would be about 1.5%.  To reach the current Fed forecast, the economy would have to expand by close to 5% in H2.

 

The projection for growth in the current quarter could edge higher if the details of the April durable goods orders report on May 26 is firmer.  The headline activity may slip on the back of lower aircraft orders.  Boeing reported its April orders slipped to 37 from 39 in March.  However, orders, excluding defense and aircraft and shipments of the same, which are inputs for capex and GDP forecasts, should both be above Q1 averages.

 

Separately, the Richmond and Dallas Fed manufacturing surveys, and the Chicago PMI and Milwaukee ISM will also likely boost confidence that the world's largest economy is not recession-bound.  Whereas the Atlanta Fed's GDPNow suggests the US economy is tracking 0.7% growth in Q2, we expect the incoming data to gradually lift this estimate.  The increase in aggregate income (~5% year-over-year) and the increase in savings (~$125 bln in Q1) will likely provide the fuel for stronger consumption going forward.

 

The economic data is one thing, but how the markets respond to it is a different matter.  For the better part of the past two months, disappointing, though not always weak, US data sparked dollar selling.  At the same time, the dollar was not rewarded for good news.  This was broadly consistent with the dollar's downside correction after recording one of the strongest quarterly performances in many years.   How the markets respond to the new fundamental news may be more revealing that the economic data itself.

 

The Bank of Canada is the only central bank that meets during the last week of May. There is little doubt that policy will remain on hold.  The economy has generally performed in line with the Bank of Canada's expectations.  Speculators shift to a net long positions in the futures market, for the first time since last September strikes us a premature.  We suspect that this net long position was established at the end of the Canadian dollar's two-month upside correction.  

 

The economic highlight from the eurozone will be April money supply data.  M3 has been trending up for a year.  It is expected to have accelerated on a 3-month year-over-year basis to 4.5% from 4.1%.  It had bottomed at 1% in April 2014.  More importantly, credit extension is accelerating a well.  This is important because this is the last data point to set the condition for the TLTRO that will be available in the middle of June.  Lending to households had turned positive recently and now lending to business is expected be turn up too.

 

The unresolved Greek crisis continues to hang over the market.  No doubt it will be a point of discussion at the G7 meeting being held in Dresden on May 27-29.  Just like there has been greater progress since Greek Prime Minister Tsipras reigned in his finance minister, is it really beyond the pale to suspect that if Merkel would reign in her finance minister (who has recently appeared to advocate referendum and a parallel currency for Greece), it would also be helpful?  What Europe has to convince its G7 partners of is that is it not turning a broken state into a failed state.  

 

The immediate problem is that Greece owes the IMF about 1.6 bln euros spread out over four payments in June.  Recall that the last payment to the IMF was made possible only because the Greek government borrowed from a reserve account held by the IMF itself.  If that reserve account is not repaid in a few weeks, the IMF will begin another set of procedures against Greece.  It is true that Greece has cried wolf many times, saying it would not make a debt payment, but then somehow,  miraculously,  found the means to make the payment.  

 

Greece was the proverbial canary in the coal mine in 2010 and Syriza is performing a similar function five years later.  The political push back against austerity is not isolated to Athens.  Today's local elections in Spain will offer a test for Podemos, which shares many beliefs of Syriza. Prime Minister Rajoy has staked his political future on the improving macro-economic conditions.  The strategy has not yet yielded positive results.  The local elections will also be a test for the new center-right alternative to Rajoy's PP, the Ciudadanos.

 

Three non-EMU European countries will report Q1 GDP figures in the week ahead.  The UK is expected to revise up its preliminary estimate of 0.3%.  Industrial output and construction figures for March were stronger than the ONS projected.  Sweden, where the central bank has set a negative repo rate and is engaged in a bond-buying program is likely to have grown just less than 1% after growing a little more than 1% in Q4 14.  Switzerland's growth is expected to have slowed to 0.3% from 0.6%.

 

Turning to Asia, there is a Japanese economic report every day in next week.  The picture that is likely to emerge from the data is an economy that is picking up after losing some momentum as Q1 wound down.  Retail sales, overall household spending, and industrial production are expected to have improved.  However, if the main thrust of the aggressive monetary easing was to fuel an increase in inflation, it has been considerably less successful.  With last year's sales tax increase dropping out of the base effect, core inflation (which excludes fresh food) is expected to be around 0.2%.  

 

Lastly, before the weekend Chinese officials confirmed the long anticipated mutual recognition of mutual fund listing between the mainland and Hong Kong (SAR) will begin July 1.  This represents a new era for asset managers.  Previously foreign asset managers accessed Chinese savings by partnering with local mutual fund companies.  The mutual recognition will allow Hong Kong domiciled funds to sell directing into China and allows China-based fund managers to sell their product in Hong Kong.  The initial quota will be CNY600 bln  (~$97 bln) evenly split between the two.  This is seen as enhancing the case to include Chinese "A shares" into the MSCI indices and demonstrating the liberalization that may see the yuan included in the SDR later this year.   

 








We’re at the point of absurdity. Maybe it made sense when you had a crisis. It does not make sense now.

The world lost one of its truly beautiful minds this Saturday, when a taxi carrying John Nash, 86, and his wife of nearly 60 years, Alicia, crashed on the New Jersey Turnpike. The two were killed on the spot when the driver of the Ford Crown Victoria lost control as he tried to pass a Chrysler in the center lane, crashing into a guard rail according to NJ.com.

The Nashes were ejected from the car according to State Police Sgt. Gregory Williams, adding that "It doesn't appear that they were wearing seatbelts."

The second vehicle also crashed into the guard rail, Williams said. The taxi driver was extricated from the vehicle and flown to Robert Wood Johnson University Hospital in New Brunswick with non-life-threatening injuries.

John Forbes Nash, Jr, was best known recently for the 2001 movie starting Russell Crowe "A Beautiful Mind" which depicted Nash's struggles with schizophrenia. His biggest accomplishment was his groundbreaking and pioneering work on game theory. Nash earned a Ph.D. degree in 1950 with a 28-page dissertation on non-cooperative games.

The thesis contained the definition and properties of what is now known as the "Nash equilibrium" - a crucial concept in non-cooperative games, it won Nash the Nobel Memorial Prize in Economic Sciences in 1994.

As NJ.com reports, Nash spent his career at Princeton University and the Massachusetts Institute of Technology. He's considered a giant in mathematics, particularly in the field of partial differential equations, but won the Nobel Prize in economics for a paper he wrote on game theory, the mathematics of decision-making.

In addition to the Nobel, Nash has won the John von Neumann Theory Prize (1978) and the American Mathematical Society's Steele Prize for a Seminal Contribution to Research (1999).

Nash was in Norway on Tuesday to receive the Abel Prize for mathematics from King Harald V for his work, along with longtime colleague Louis Nirenberg, on nonlinear partial differential equations.

Nirenberg, reached at his home Sunday, said Nash was a "wonderful mathematician" and person. Nirenberg had just flown back from Norway with the couple. The Nashes were taking a taxi back from the airport, he said. Nirenberg had known the couple since the 1950s.

Alicia Nash was his caretaker while he battled his mental illness. They became mental health care advocates when their son John was also diagnosed with schizophrenia.

Upon learning of the crash, Russell Crowe who was nominated for the Best Actor Oscar for his role as John Nash took to Twitter to share condolences.

Stunned...my heart goes out to John & Alicia & family.
An amazing partnership. Beautiful minds, beautiful hearts. https://t.co/XF4V9MBwU4

— Russell Crowe (@russellcrowe) May 24, 2015

We share in his condolences as the world has indeed just lost one of its most brilliant minds of the past century.

Follows a clip of Nash accepting the Nobel prize in 1994.

 

And here is an interview with Dr. John Nash at the 1st Meeting of Laureates in Economic Sciences in Lindau, Germany, September 1-4, 2004.

 

What may be one of Nash's last documented media appearances, here is the legendary mathematician speaking at Seton Hall University in 2012.

 

Finally, for those who may be unfamiliar with Nash's life and achievements, here is a National Geographic documentary of the game theory pioneer.








That may all have changed now when a declassified secret US government document obtained by the public interest law firm, Judicial Watch, shows that Western governments deliberately allied with al-Qaeda and other Islamist extremist groups to topple Syrian dictator Bashir al-Assad.

India Gold 2

An interesting fact has recently crossed the newswires, as India’s banking system is ready to start paying its clients interest on physical gold.

The Indian Minister of Finance, Arun Jaitley, has revealed new guidelines for the financial system, and the proposed new rules are somewhat surprising, even though the minister had already hinted in an earlier speech that 'gold could become an even more important asset during his tenure'.

Banks would not only be allowed to count the gold as part of their cash reserve ratio, it would also count as an integral part of the liquidity ratio of the banks which is now based on bonds rather than hard assets. That’s an important step forward which should pave the way for gold to become a much more important asset in India’s financial system.

This shouldn’t really come as a huge surprise as the Indians have always been a little bit crazy about gold. India is one of the largest gold-importing countries and the yellow metal is used as a gift on traditionally important days such as weddings. As India doesn’t have a mature gold mining sector at all, the vast majority of the gold will have to be imported and this incentivizes smugglers to bring gold into the country without declaring it to the proper authorities.

India Gold Import

Source: GoldchartsRus.com

It’s unheard of in this modern world that gold will effectively be earning an interest when deposited at the bank. By this move, the Indian banking sector implicitly confirms it considers physical gold to be a currency above anything else.

If gold would indeed be widely accepted in the banking system, it would activate a part of the 20,000 unused tonnes of gold and this would reduce the pressure on the Indians to import gold.

Gold Price India

Source: Goldprice.org

But there’s one critical flaw in this idea.

If one ounce of gold owned by family X is deposited at the bank, and the bank subsequently lends it out to family Y which was looking to buy gold for a wedding, where will the bank get the gold from to repay family X when it wants to withdraw its gold from the banking system?

Indeed, the bank will very likely use the gold deposited by family Z to ‘repay’ family X’s deposit. This system will work great in the beginning, but can you imagine what would happen if the majority of the clients are demanding their gold back from the banks? The bank will not be able to refund everybody and that’s the exact moment where this Ponzi scheme (and yes, this is a Ponzi pyramid) will come to a screeching halt.

It’s great to see banks will be allowed to count the gold as a part of their reserves but this idea definitely needs to be worked out before it gets instated as a system that would facilitate a Ponzi scheme in gold.

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Authored by F. William Engdahl via New Eastern Outlook,

What if Putin is Telling The Truth?

On April 26 Russia’s main national TV station, Rossiya 1, featured President Vladimir Putin in a documentary to the Russian people on the events of the recent period including the annexation of Crimea, the US coup d’etat in Ukraine, and the general state of relations with the United States and the EU. His words were frank. And in the middle of his remarks the Russian former KGB chief dropped a political bombshell that was known by Russian intelligence two decades ago.

Putin stated bluntly that in his view the West would only be content in having a Russia weak, suffering and begging from the West, something clearly the Russian character is not disposed to. Then a short way into his remarks, the Russian President stated for the first time publicly something that Russian intelligence has known for almost two decades but kept silent until now, most probably in hopes of an era of better normalized Russia-US relations.

Putin stated that the terror in Chechnya and in the Russian Caucasus in the early 1990’s was actively backed by the CIA and western Intelligence services to deliberately weaken Russia. He noted that the Russian FSB foreign intelligence had documentation of the US covert role without giving details.

What Putin, an intelligence professional of the highest order, only hinted at in his remarks, I have documented in detail from non-Russian sources. The report has enormous implications to reveal to the world the long-standing hidden agenda of influential circles in Washington to destroy Russia as a functioning sovereign state, an agenda which includes the neo-nazi coup d’etat in Ukraine and severe financial sanction warfare against Moscow. The following is drawn on my book, “The Lost Hegemon” to be published soon…

CIA’s Chechen Wars

Not long after the CIA and Saudi Intelligence-financed Mujahideen had devastated Afghanistan at the end of the 1980’s, forcing the exit of the Soviet Army in 1989, and the dissolution of the Soviet Union itself some months later, the CIA began to look at possible places in the collapsing Soviet Union where their trained “Afghan Arabs” could be redeployed to further destabilize Russian influence over the post-Soviet Eurasian space.

They were called Afghan Arabs because they had been recruited from ultraconservative Wahhabite Sunni Muslims from Saudi Arabia, the Arab Emirates, Kuwait, and elsewhere in the Arab world where the ultra-strict Wahhabite Islam was practiced. They were brought to Afghanistan in the early 1980’s by a Saudi CIA recruit who had been sent to Afghanistan named Osama bin Laden.

With the former Soviet Union in total chaos and disarray, George H.W. Bush’s Administration decided to “kick ‘em when they’re down,” a sad error. Washington redeployed their Afghan veteran terrorists to bring chaos and destabilize all of Central Asia, even into the Russian Federation itself, then in a deep and traumatic crisis during the economic collapse of the Yeltsin era.

In the early 1990s, Dick Cheney’s company, Halliburton, had surveyed the offshore oil potentials of Azerbaijan, Kazakhstan, and the entire Caspian Sea Basin. They estimated the region to be “another Saudi Arabia” worth several trillion dollars on today’s market. The US and UK were determined to keep that oil bonanza from Russian control by all means. The first target of Washington was to stage a coup in Azerbaijan against elected president Abulfaz Elchibey to install a President more friendly to a US-controlled Baku–Tbilisi–Ceyhan (BTC) oil pipeline, “the world’s most political pipeline,” bringing Baku oil from Azerbaijan through Georgia to Turkey and the Mediterranean.

At that time, the only existing oil pipeline from Baku was a Soviet era Russian pipeline that ran through the Chechen capital, Grozny, taking Baku oil north via Russia’s Dagestan province, and across Chechenya to the Black Sea Russian port of Novorossiysk. The pipeline was the only competition and major obstacle to the very costly alternative route of Washington and the British and US oil majors.

President Bush Sr. gave his old friends at CIA the mandate to destroy that Russian Chechen pipeline and create such chaos in the Caucasus that no Western or Russian company would consider using the Grozny Russian oil pipeline.

Graham E. Fuller, an old colleague of Bush and former Deputy Director of the CIA National Council on Intelligence had been a key architect of the CIA Mujahideen strategy. Fuller described the CIA strategy in the Caucasus in the early 1990s: “The policy of guiding the evolution of Islam and of helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power.”6

The CIA used a dirty tricks veteran, General Richard Secord, for the operation. Secord created a CIA front company, MEGA Oil. Secord had been convicted in the 1980s for his central role in the CIA’s Iran-Contra illegal arms and drugs operations.

In 1991 Secord, former Deputy Assistant Secretary of Defense, landed in Baku and set up the CIA front company, MEGA Oil. He was a veteran of the CIA covert opium operations in Laos during the Vietnam War. In Azerbaijan, he setup an airline to secretly fly hundreds of bin Laden’s al-Qaeda Mujahideen from Afghanistan into Azerbaijan. By 1993, MEGA Oil had recruited and armed 2,000 Mujahideen, converting Baku into a base for Caucasus-wide Mujahideen terrorist operations.

General Secord’s covert Mujahideen operation in the Caucasus initiated the military coup that toppled elected president Abulfaz Elchibey that year and installed Heydar Aliyev, a more pliable US puppet. A secret Turkish intelligence report leaked to the Sunday Times of London confirmed that “two petrol giants, BP and Amoco, British and American respectively, which together form the AIOC (Azerbaijan International Oil Consortium), are behind the coup d’état.”

Saudi Intelligence head, Turki al-Faisal, arranged that his agent, Osama bin Laden, whom he had sent to Afghanistan at the start of the Afghan war in the early 1980s, would use his Afghan organization Maktab al-Khidamat (MAK) to recruit “Afghan Arabs” for what was rapidly becoming a global Jihad. Bin Laden’s mercenaries were used as shock troops by the Pentagon and CIA to coordinate and support Muslim offensives not only Azerbaijan but also in Chechnya and, later, Bosnia.

Bin Laden brought in another Saudi, Ibn al-Khattab, to become Commander, or Emir of Jihadist Mujahideen in Chechnya (sic!) together with Chechen warlord Shamil Basayev. No matter that Ibn al-Khattab was a Saudi Arab who spoke barely a word of Chechen, let alone, Russian. He knew what Russian soldiers looked like and how to kill them.

Chechnya then was traditionally a predominantly Sufi society, a mild apolitical branch of Islam. Yet the increasing infiltration of the well-financed and well-trained US-sponsored Mujahideen terrorists preaching Jihad or Holy War against Russians transformed the initially reformist Chechen resistance movement. They spread al-Qaeda’s hardline Islamist ideology across the Caucasus. Under Secord’s guidance, Mujahideen terrorist operations had also quickly extended into neighboring Dagestan and Chechnya, turning Baku into a shipping point for Afghan heroin to the Chechen mafia.

From the mid-1990s, bin Laden paid Chechen guerrilla leaders Shamil Basayev and Omar ibn al-Khattab the handsome sum of several million dollars per month, a King’s fortune in economically desolate Chechnya in the 1990s, enabling them to sideline the moderate Chechen majority.21 US intelligence remained deeply involved in the Chechen conflict until the end of the 1990s. According to Yossef Bodansky, then Director of the US Congressional Task Force on Terrorism and Unconventional Warfare, Washington was actively involved in “yet another anti-Russian jihad, seeking to support and empower the most virulent anti-Western Islamist forces.”

Bodansky revealed the entire CIA Caucasus strategy in detail in his report, stating that US Government officials participated in,

“a formal meeting in Azerbaijan in December 1999 in which specific programs for the training and equipping of Mujahideen from the Caucasus, Central/South Asia and the Arab world were discussed and agreed upon, culminating in Washington’s tacit encouragement of both Muslim allies (mainly Turkey, Jordan and Saudi Arabia) and US ‘private security companies’. . . to assist the Chechens and their Islamist allies to surge in the spring of 2000 and sustain the ensuing Jihad for a long time…Islamist Jihad in the Caucasus as a way to deprive Russia of a viable pipeline route through spiraling violence and terrorism.”

The most intense phase of the Chechen wars wound down in 2000 only after heavy Russian military action defeated the Islamists. It was a pyrrhic victory, costing a massive toll in human life and destruction of entire cities. The exact death toll from the CIA-instigated Chechen conflict is unknown. Unofficial estimates ranged from 25,000 to 50,000 dead or missing, mostly civilians. Russian casualties were near 11,000 according to the Committee of Soldiers’ Mothers.

The Anglo-American oil majors and the CIA’s operatives were happy. They had what they wanted: their Baku–Tbilisi–Ceyhan oil pipeline, bypassing Russia’s Grozny pipeline.

The Chechen Jihadists, under the Islamic command of Shamil Basayev, continued guerrilla attacks in and outside Chechnya. The CIA had refocused into the Caucasus.

Basayev’s Saudi Connection

Basayev was a key part of the CIA’s Global Jihad. In 1992, he met Saudi terrorist Ibn al-Khattag in Azerbaijan. From Azerbaijan, Ibn al-Khattab brought Basayev to Afghanistan to meet al-Khattab’s ally, fellow-Saudi Osama bin Laden. Ibn al-Khattab’s role was to recruit Chechen Muslims willing to wage Jihad against Russian forces in Chechnya on behalf of the covert CIA strategy of destabilizing post-Soviet Russia and securing British-US control over Caspian energy.

Once back in Chechnya, Basayev and al-Khattab created the International Islamic Brigade (IIB) with Saudi Intelligence money, approved by the CIA and coordinated through the liaison of Saudi Washington Ambassador and Bush family intimate Prince Bandar bin Sultan. Bandar, Saudi Washington Ambassador for more than two decades, was so intimate with the Bush family that George W. Bush referred to the playboy Saudi Ambassador as “Bandar Bush,” a kind of honorary family member.

Basayev and al-Khattab imported fighters from the Saudi fanatical Wahhabite strain of Sunni Islam into Chechnya. Ibn al-Khattab commanded what were called the “Arab Mujahideen in Chechnya,” his own private army of Arabs, Turks, and other foreign fighters. He was also commissioned to set up paramilitary training camps in the Caucasus Mountains of Chechnya that trained Chechens and Muslims from the North Caucasian Russian republics and from Central Asia.

The Saudi and CIA-financed Islamic International Brigade was responsible not only for terror in Chechnya. They carried out the October 2002 Moscow Dubrovka Theatre hostage seizure and the gruesome September 2004 Beslan school massacre. In 2010, the UN Security Council published the following report on al-Khattab and Basayev’s International Islamic Brigade:

Islamic International Brigade (IIB) was listed on 4 March 2003. . . as being associated with Al-Qaida, Usama bin Laden or the Taliban for “participating in the financing, planning, facilitating, preparing or perpetrating of acts or activities by, in conjunction with, under the name of, on behalf or in support of” Al-Qaida. . . The Islamic International Brigade (IIB) was founded and led by Shamil Salmanovich Basayev (deceased) and is linked to the Riyadus-Salikhin Reconnaissance and Sabotage Battalion of Chechen Martyrs (RSRSBCM). . . and the Special Purpose Islamic Regiment (SPIR). . .

 

On the evening of 23 October 2002, members of IIB, RSRSBCM and SPIR operated jointly to seize over 800 hostages at Moscow’s Podshipnikov Zavod (Dubrovka) Theater.

 

In October 1999, emissaries of Basayev and Al-Khattab traveled to Usama bin Laden’s home base in the Afghan province of Kandahar, where Bin Laden agreed to provide substantial military assistance and financial aid, including by making arrangements to send to Chechnya several hundred fighters to fight against Russian troops and perpetrate acts of terrorism. Later that year, Bin Laden sent substantial amounts of money to Basayev, Movsar Barayev (leader of SPIR) and Al-Khattab, which was to be used exclusively for training gunmen, recruiting mercenaries and buying ammunition.

The Afghan-Caucasus Al Qaeda “terrorist railway,” financed by Saudi intelligence, had two goals. One was a Saudi goal to spread fanatical Wahhabite Jihad into the Central Asian region of the former Soviet Union. The second was the CIA’s agenda of destabilizing a then-collapsing post-Soviet Russian Federation.

Beslan

On September 1, 2004, armed terrorists from Basayev and al-Khattab’s IIB took more than 1,100 people as hostages in a siege that included 777 children, and forced them into School Number One (SNO) in Beslan in North Ossetia, the autonomous republic in the North Caucasus of the Russian Federation near to the Georgia border.

On the third day of the hostage crisis, as explosions were heard inside the school, FSB and other elite Russian troops stormed the building. In the end, at least 334 hostages were killed, including 186 children, with a significant number of people injured and reported missing. It became clear afterward that the Russian forces had handled the intervention poorly.

The Washington propaganda machine, from Radio Free Europe to The New York Times and CNN, wasted no time demonizing Putin and Russia for their bad handling of the Beslan crisis rather than focus on the links of Basayev to Al Qaeda and Saudi intelligence. That would have brought the world’s attention to the intimate relations between the family of then US President George W. Bush and the Saudi billionaire bin Laden family.

On September 1, 2001, just ten days before the day of the World Trade Center and Pentagon attacks, Saudi Intelligence head US-educated Prince Turki bin Faisal Al Saud, who had directed Saudi Intelligence since 1977, including through the entire Osama bin Laden Mujahideen operation in Afghanistan and into the Caucasus, abruptly and inexplicably resigned, just days after having accepted a new term as intelligence head from his King. He gave no explanation. He was quickly reposted to London, away from Washington.

The record of the bin Laden-Bush family intimate ties was buried, in fact entirely deleted on “national security” (sic!) grounds in the official US Commission Report on 911. The Saudi background of fourteen of the nineteen alleged 911 terrorists in New York and Washington was also deleted from the US Government’s final 911 Commission report, released only in July 2004 by the Bush Administration, almost three years after the events.

Basayev claimed credit for having sent the terrorists to Beslan. His demands had included the complete independence of Chechnya from Russia, something that would have given Washington and the Pentagon an enormous strategic dagger in the southern underbelly of the Russian Federation.

By late 2004, in the aftermath of the tragic Beslan drama, President Vladimir Putin reportedly ordered a secret search and destroy mission by Russian intelligence to hunt and kill key leaders of the Caucasus Mujahideen of Basayev. Al-Khattab had been killed in 2002. The Russian security forces soon discovered that most of the Chechen Afghan Arab terrorists had fled. They had gotten safe haven in Turkey, a NATO member; in Azerbaijan, by then almost a NATO Member; or in Germany, a NATO Member; or in Dubai–one of the closest US Allies in the Arab States, and Qatar-another very close US ally. In other words, the Chechen terrorists were given NATO safe haven.








By Chris at www.CapitalistExploits.at

Frontier markets and volatility go together like bacon and eggs. Bursting with energy, chaotic and often smelly they lurch about like a young calf finding its legs.

Mongolia could quite aptly be seen to be such a calf. Sometimes the calf lurches about and remains standing. Sometimes it falls over. Two years ago Mongolia fell over.

Calf

To understand what originally drove Mongolia's economy to post a blistering 17.3% growth rate in 2011 we need only look at the $6.6 billion investment into stage one of the enormous Oyu Tolgoi copper-gold project. OT, as it's known, is owned 34% by the Mongolian Government with Turquoise Hill (TRQ) owning 66% of the project. Rio Tinto in turn controls TRQ by way of their 51% stake in TRQ.

In February of 2011 Turquoise Hill Resources hit $21.75, valuing the company at $43.8 billion.

What happens to Oyu Tolgoi has such a dramatic effect on the country as when in full operation the mine is expected to account for a third of the country's GDP. This is truly unique. I don't know of any other country in the world where a single project has such a dramatic impact on the economy.

To understand why TRQ came to be valued like Uber we need to understand that the Oyu Tolgoi mine is expected to produce as much as 195,000 tons of copper and up to 700,000 ounces of gold in concentrates next year. At current prices this equates to $846M of gold and $1.2B of copper.

In 2011, however, gold was trading at $1,800 and copper as high as $9,555 per tonne while today gold trades at $1,200 an ounce and copper $6,200 per tonne, so we can see that with those numbers another $1B would have been added back in 2011. You can see the graphical representation of TRQ's share price together with the price of copper during this time frame.

Chart

Now, anyone paying even a modicum of attention will see that TRQ has been oversold based only on the metrics of the copper and gold price. To understand why today TRQ is valued at just $9B and why the Mongolian economy has suffered while such riches sit on their doorstep we need only turn to - you guessed it - the government.

The Government of Mongolia managed to grind the project to a halt for 2 years as disputes raged. I won't go into all the details, as there is ample commentary on the internet about the dispute. Suffice to say that government by their very nature are parasitic entities, most of whom are about as practical as a curly ruler. In this respect the Mongolian government did not disappoint, holding dear to some of the central tenets of the state everywhere, namely economic ignorance and plain stupidity.

What followed was a deafening roar as you could literally hear the money packing up and leaving on flights out of Chinggis Khaan airport. FDI collapsed to just $400 million last year, down from $4.5 billion in 2012, and the local currency, the tugrik, got body-slammed, falling from 1,200 to 1,900 against the dollar.

Fast forward to present day and the new president has just signed a landmark deal finally resolving all issues with Rio Tinto.

We have deep connections in the country and have a constant feed of information, and just over a month ago we received advance notification that things were turning around in Mongolia. I also hopped on the phone with our friend Harris Kupperman, the CEO of Mongolia Growth Group, to get his take on things. I recorded the call which you can listen to here.

When I wrote my last post on the topic I mentioned that we were picking up some TRQ which was then trading at $3.73. Today at $4.50 a few weeks later we have to ask ourselves the obvious question: Are we on the brink of another run? While I'm not going to scoff at over 20% in just over a month the truth is we don't invest in frontier markets for 20% gains. We invest for thousands of percent gains.

Even though Mongolia fell over, like most calves, it is likely it will get back up again. Right now the odds seem to be decent that it is indeed doing so. It may be time to take a deeper look.

Assets are dirt cheap, the currency has been crushed and it looks like we're about to have the $5.4 billion underground expansion of the OT project finally proceed.

We're currently holding onto a small illiquid but traded company which has been growing 40% YoY in a really tough market for the last 2 years. They've been hit by the foreign exchange collapse but when, or indeed if capital begins coming back into the country then it's companies such as this one which have the potential to really fly.

We'll have more on this topic and what we're looking at there in the future.

- Chris

 

"In value investing, money is made after the crash, not before." - Mark Mobius








Submiutted by Mac Slavo via SHTFPlan.com,

mass-die-offs-california

“Ocean’s dying, plankton’s dying… it’s people. Soylent Green is made out of people. They’re making our food out of people. Next thing they’ll be breeding us like cattle for food. You’ve gotta tell them. You’ve gotta tell them!”

It was the dying cry of Charlton Heston in the creepy 1973 film Soylent Green… and it could resemble our desperate near future.

The ocean is dying, by all accounts – and if so, the food supply along with it. The causes are numerous, and overlapping. And massive numbers of wild animal populations are dying as a result of it.

Natural causes in the environment are partly to blame; so too are the corporations of man; the effects of Fukushima, unleashing untold levels of radiation into the ocean and onto Pacific shores; the cumulative effect of modern chemicals and agricultural waste tainting the water and disrupting reproduction.

A startling new report says in no uncertain terms that the Pacific Ocean off the California coast is turning into a desert. Once full of life, it is now becoming barren, and marine mammals, seabirds and fish are starving as a result. According to Ocean Health:

The waters of the Pacific off the coast of California are a clear, shimmering blue today, so transparent it’s possible to see the sandy bottom below […] clear water is a sign that the ocean is turning into a desert, and the chain reaction that causes that bitter clarity is perhaps most obvious on the beaches of the Golden State, where thousands of emaciated sea lion pups are stranded.

 

[…]

 

Over the last three years, the National Oceanic and Atmospheric Administration (NOAA) has noticed a growing number of strandings on the beaches of California and up into the Pacific north-west. In 2013, 1,171 sea lions were stranded, and 2,700 have already stranded in 2015 – a sign that something is seriously wrong, as pups don’t normally wind up on their own until later in the spring and early summer.

 

“[An unusually large number of sea lions stranding in 2013 was a red flag] there was a food availability problem even before the ocean got warm.” Johnson: This has never happened before… It’s incredible. It’s so unusual, and there’s no really good explanation for it. There’s also a good chance that the problem will continue, said a NOAA research scientist in climatology, Nate Mantua.

 

Experts blame a lack of food due to unusually warm ocean waters. NOAA declared an El Nino, the weather pattern that warms the Pacific, a few weeks ago. The water is three and a half to six degrees warmer than the average, according to Mantua, because of a lack of north wind on the West Coast. Ordinarily, the north wind drives the current, creating upwelling that brings forth the nutrients that feed the sardines, anchovies and other fish that adult sea lions feed on.

Fox News added:

The warm water is likely pushing prime sea lion foods — market squid, sardines and anchovies — further north, forcing the mothers to abandon their pups for up to eight days at a time in search of sustenance.

 

The pups, scientists believe, are weaning themselves early out of desperation and setting out on their own despite being underweight and ill-prepared to hunt.

 

[…]

 

“These animals are coming in really desperate. They’re at the end of life. They’re in a crisis … and not all animals are going to make it,” said Keith A. Matassa, executive director at the Pacific Marine Mammal Center, which is currently rehabilitating 115 sea lion pups.

The same is true of seabirds on the Washington State coast:

In the storm debris littering a Washington State shoreline, Bonnie Wood saw something grisly: the mangled bodies of dozens of scraggly young seabirds. Walking half a mile along the beach at Twin Harbors State Park on Wednesday, Wood spotted more than 130 carcasses of juvenile Cassin’s auklets—the blue-footed, palm-size victims of what is becoming one of the largest mass die-offs of seabirds ever recorded. “It was so distressing,” recalled Wood, a volunteer who patrols Pacific Northwest beaches looking for dead or stranded birds. “They were just everywhere. Every ten yards we’d find another ten bodies of these sweet little things.”

 

“This is just massive, massive, unprecedented,” said Julia Parrish, a University of Washington seabird ecologist who oversees the Coastal Observation and Seabird Survey Team (COASST), a program that has tracked West Coast seabird deaths for almost 20 years. “We may be talking about 50,000 to 100,000 deaths. So far.” (source)

100,000 doesn’t necessarily sound large, statistically speaking, but precedent in the history of recorded animal deaths suggests that it is, in fact massive. Even National Geographic is noting that these die off events are “unprecedented.” Warmer water is indicated for much of the starvation faced by many of the dead animals.

Last year, scientists sounded the alarm over the death of millions of star fish, blamed on warmer waters and ‘mystery virus':

Starfish are dying by the millions up and down the West Coast, leading scientists to warn of the possibility of localized extinction of some species. As the disease spreads, researchers may be zeroing in on a link between warming waters and the rising starfish body count. (source)

 

[…]

 

 

The epidemic, which threatens to reshape the coastal food web and change the makeup of tide pools for years to come, appears to be driven by a previously unidentified virus, a team of more than a dozen researchers from Cornell University, UC Santa Cruz, the Monterey Bay Aquarium and other institutions reported Monday. (source)

Changing temperatures in the Pacific Ocean, driven by the natural cycle of gyres over decades, shifts wildlife populations, decimating the populations of species throughout the food chain, proving how fragile the balance of life in the ocean really is.

Recently, the collapse of the sardine population has created a crisis for fisheries and marine wildlife alike on the West Coast:

Commercial fishing for sardines off of Canada’s West Coast is worth an estimated $32 million – but now they are suddenly gone. Back in October, fisherman reported that they came back empty-handed without a single fish after 12 hours of trolling and some $1000 spent on fuel.

 

Sandy Mazza, for the Daily Breeze, reported a similar phenomenon in central California: “[T]he fickle sardines have been so abundant for so many years – sometimes holding court as the most plentiful fish in coastal waters – that it was a shock when he couldn’t find one of the shiny silver-blue coastal fish all summer, even though this isn’t the first time they’ve vanished.” [emphasis added]

 

[…]

 

“Is it El Nino? Pacific Decadal Oscillation? [La] Nina? Long-term climate change? More marine mammals eating sardines? Did they all go to Mexico or farther offshore? We don’t know. We’re pretty sure the overall population has declined. We manage them pretty conservatively because we don’t want to end up with another Cannery Row so, as the population declines, we curb fishing.” said National Oceanic and Atmospheric Administration (NOAA) official Kerry Griffin. (source)

According to a report in the Daily Mail, the worst events have wiped out 90% of animal populations, falling short of extinction, but creating a rupture in food chains and ecosystems.

And environmental factors are known to be a factor, with pollution from chemicals dumped by factories clearly tied to at least 20% of the mass die off events of wildlife populations that have been investigated, and many die offs implicated by a number of overlapping factors. The Daily Mail reported:

Mass die-offs of certain animals has increased in frequency every year for seven decades, according to a new study.

 

Researchers found that such events, which can kill more than 90 per cent of a population, are increasing among birds, fish and marine invertebrates.

 

The reasons for the die-offs are diverse, with effects tied to humans such as environmental contamination accounting for about a fifth of them.

Farm runoff from Big Agra introduces high levels of fertilizers and pesticides which create oxygen-starved dead zones which fish and aquatic live is killed off. Also preset in agriculture waste are gender bending chemicals like those found in Atrazine, used in staple crop production, and antibiotics and hormones, used in livestock production, which creates hazardous runoff for fish populations:

Livestock excrete natural hormones – estrogens and testosterones – as well as synthetic ones used to bolster their growth. Depending on concentrations and fish sensitivity, these hormones and hormone mimics might impair wild fish reproduction or skew their sex ratios. (source)

Pharmaceutical contaminants are also to blame for changing the sex of fish and disrupting population numbers, while a study found that the chemicals in Prozac changed the behavior of marine life, and made shrimp many times more likely to “commit suicide” and swim towards the light where they became easy prey.

Fish farms also introduce a large volume of antibiotic and chemical pollution into oceans and waterways:

The close quarters where farmed fish are raised (combined with their unnatural diets) means disease occurs often and can spread quickly. On fish farms, which are basically “CAFOs of the sea,” antibiotics are dispersed into the water, and sometimes injected directly into the fish.

 

Unfortunately, farmed fish are often raised in pens in the ocean, which means not only that pathogens can spread like wildfire and contaminate any wild fish swimming past – but the antibiotics can also spread to wild fish (via aquaculture and wastewater runoff) – and that’s exactly what recent research revealed. (source)

Mass die offs of fish on the Brazilian coastline have linked to pollution from the dumping of raw sewage and garbage.

In the last few days it was reported that a massive die off of bottlenose dolphins in the Gulf of Mexico was connected by researchers to BP’s Deep Water Horizon oil spill. Evidence was found in a third of the cases of lesions in the adrenal gland, an otherwise rare condition linked with petroleum exposure. More than a fifth of the dolphins also suffered bacterial pneumonia, causing deadly lung infection that is likewise rarely seen in dolphin populations.








From the first sudden, and quite dramatic, appearance of the fanatical Islamic group known as ISIS which was largely unheard of until a year ago, on the world's stage and which promptly replaced the worn out and tired al Qaeda as the world's terrorist bogeyman, we suggested that the "straight to beheading YouTube clip" purpose behind the Saudi Arabia-funded Islamic State was a simple one: use the Jihadists as the vehicle of choice to achieve a political goal: depose of Syria's president Assad, who for years has stood in the way of a critical Qatari natural gas pipeline, one which could dethrone Russia as Europe's dominant - and belligerent - source of energy, reaching an interim climax with the unsuccessful Mediterranean Sea military build up of 2013, which nearly resulted in quasi-world war.

The narrative and the plotline were so transparent, even Russia saw right through them. Recall from September of last year:

If the West bombs Islamic State militants in Syria without consulting Damascus, LiveLeak reports that the anti-ISIS alliance may use the occasion to launch airstrikes against President Bashar Assad’s forces, according to Russian Foreign Minister Sergey Lavrov. Clearly comprehending that Obama's new strategy against ISIS in Syria is all about pushing the Qatar pipeline through (as was the impetus behind the 2013 intervention push), Russia is pushing back noting that the it is using ISIS as a pretext for bombing Syrian government forces and warning that "such a development would lead to a huge escalation of conflict in the Middle East and North Africa."

But it's one thing to speculate; it's something entirely different to have hard proof.

And while speculation was rife that just like the CIA-funded al Qaeda had been used as a facade by the US to achieve its own geopolitical and national interests over the past two decades, so ISIS was nothing more than al Qaeda 2.0, there was no actual evidence of just this.

That may all have changed now when a declassified secret US government document obtained by the public interest law firm, Judicial Watch, shows that Western governments deliberately allied with al-Qaeda and other Islamist extremist groups to topple Syrian dictator Bashir al-Assad.

According to investigative reporter Nafeez Ahmed in Medium, the "leaked document reveals that in coordination with the Gulf states and Turkey, the West intentionally sponsored violent Islamist groups to destabilize Assad, despite anticipating that doing so could lead to the emergence of an ‘Islamic State’ in Iraq and Syria (ISIS).

According to the newly declassified US document, the Pentagon foresaw the likely rise of the ‘Islamic State’ as a direct consequence of the strategy, but described this outcome as a strategic opportunity to “isolate the Syrian regime.” 

And not just that: as we reported last week, now that ISIS is running around the middle east, cutting people's heads of in 1080p quality and Hollywood-quality (perhaps literally) video, the US has a credible justification to sell billions worth of modern, sophisticated weapons in the region in order to "modernize" and "replenish" the weapons of such US allies as Saudi Arabia, Israel and Iraq.

But that the US military-industrial complex is a winner every time war breaks out anywhere in the world (usually with the assistance of the CIA) is clear to everyone by now. What wasn't clear is just how the US predetermined the current course of events in the middle east.

Now, thanks to the following declassified report, we have a far better understanding of not only how current events in the middle east came to be, but what America's puppermaster role leading up to it all, was. 

From Nafeez Ahmed: Secret Pentagon report reveals West saw ISIS as strategic asset Anti-ISIS coalition knowingly sponsored violent extremists to ‘isolate’ Assad, rollback ‘Shia expansion', originally posted in Medium.

Hypocrisy

 

The revelations contradict the official line of Western government on their policies in Syria, and raise disturbing questions about secret Western support for violent extremists abroad, while using the burgeoning threat of terror to justify excessive mass surveillance and crackdowns on civil liberties at home.

Among the batch of documents obtained by Judicial Watch through a federal lawsuit, released earlier this week, is a US Defense Intelligence Agency (DIA) document then classified as “secret,” dated 12th August 2012.

The DIA provides military intelligence in support of planners, policymakers and operations for the US Department of Defense and intelligence community.

So far, media reporting has focused on the evidence that the Obama administration knew of arms supplies from a Libyan terrorist stronghold to rebels in Syria.

Some outlets have reported the US intelligence community’s internal prediction of the rise of ISIS. Yet none have accurately acknowledged the disturbing details exposing how the West knowingly fostered a sectarian, al-Qaeda-driven rebellion in Syria.

Charles Shoebridge, a former British Army and Metropolitan Police counter-terrorism intelligence officer, said:

“Given the political leanings of the organisation that obtained these documents, it’s unsurprising that the main emphasis given to them thus far has been an attempt to embarrass Hilary Clinton regarding what was known about the attack on the US consulate in Benghazi in 2012. However, the documents also contain far less publicized revelations that raise vitally important questions of the West’s governments and media in their support of Syria’s rebellion.”

The West’s Islamists

The newly declassified DIA document from 2012 confirms that the main component of the anti-Assad rebel forces by this time comprised Islamist insurgents affiliated to groups that would lead to the emergence of ISIS. Despite this, these groups were to continue receiving support from Western militaries and their regional allies.

Noting that “the Salafist [sic], the Muslim Brotherhood, and AQI [al-Qaeda in Iraq] are the major forces driving the insurgency in Syria,” the document states that “the West, Gulf countries, and Turkey support the opposition,” while Russia, China and Iran “support the [Assad] regime.”

The 7-page DIA document states that al-Qaeda in Iraq (AQI), the precursor to the ‘Islamic State in Iraq,’ (ISI) which became the ‘Islamic State in Iraq and Syria,’ “supported the Syrian opposition from the beginning, both ideologically and through the media.”

The formerly secret Pentagon report notes that the “rise of the insurgency in Syria” has increasingly taken a “sectarian direction,” attracting diverse support from Sunni “religious and tribal powers” across the region.

In a section titled ‘The Future Assumptions of the Crisis,’ the DIA report predicts that while Assad’s regime will survive, retaining control over Syrian territory, the crisis will continue to escalate “into proxy war.”

The document also recommends the creation of “safe havens under international sheltering, similar to what transpired in Libya when Benghazi was chosen as the command centre for the temporary government.”

In Libya, anti-Gaddafi rebels, most of whom were al-Qaeda affiliated militias, were protected by NATO ‘safe havens’ (aka ‘no fly zones’).

‘Supporting powers want’ ISIS entity

In a strikingly prescient prediction, the Pentagon document explicitly forecasts the probable declaration of “an Islamic State through its union with other terrorist organizations in Iraq and Syria.”

Nevertheless, “Western countries, the Gulf states and Turkey are supporting these efforts” by Syrian “opposition forces” fighting to “control the eastern areas (Hasaka and Der Zor), adjacent to Western Iraqi provinces (Mosul and Anbar)”:

“… there is the possibility of establishing a declared or undeclared Salafist Principality in eastern Syria (Hasaka and Der Zor), and this is exactly what the supporting powers to the opposition want, in order to isolate the Syrian regime, which is considered the strategic depth of the Shia expansion (Iraq and Iran).”

The secret Pentagon document thus provides extraordinary confirmation that the US-led coalition currently fighting ISIS, had three years ago welcomed the emergence of an extremist “Salafist Principality” in the region as a way to undermine Assad, and block off the strategic expansion of Iran. Crucially, Iraq is labeled as an integral part of this “Shia expansion.”

The establishment of such a “Salafist Principality” in eastern Syria, the DIA document asserts, is “exactly” what the “supporting powers to the [Syrian] opposition want.” Earlier on, the document repeatedly describes those “supporting powers” as “the West, Gulf countries, and Turkey.”

Further on, the document reveals that Pentagon analysts were acutely aware of the dire risks of this strategy, yet ploughed ahead anyway.

The establishment of such a “Salafist Principality” in eastern Syria, it says, would create “the ideal atmosphere for AQI to return to its old pockets in Mosul and Ramadi.” Last summer, ISIS conquered Mosul in Iraq, and just this month has also taken control of Ramadi.

Such a quasi-state entity will provide:

“… a renewed momentum under the presumption of unifying the jihad among Sunni Iraq and Syria, and the rest of the Sunnis in the Arab world against what it considers one enemy. ISI could also declare an Islamic State through its union with other terrorist organizations in Iraq and Syria, which will create grave danger in regards to unifying Iraq and the protection of territory.”

The 2012 DIA document is an Intelligence Information Report (IIR), not a “finally evaluated intelligence” assessment, but its contents are vetted before distribution. The report was circulated throughout the US intelligence community, including to the State Department, Central Command, the Department of Homeland Security, the CIA, FBI, among other agencies.

In response to my questions about the strategy, the British government simply denied the Pentagon report’s startling revelations of deliberate Western sponsorship of violent extremists in Syria. A British Foreign Office spokesperson said:

“AQ and ISIL are proscribed terrorist organisations. The UK opposes all forms of terrorism. AQ, ISIL, and their affiliates pose a direct threat to the UK’s national security. We are part of a military and political coalition to defeat ISIL in Iraq and Syria, and are working with international partners to counter the threat from AQ and other terrorist groups in that region. In Syria we have always supported those moderate opposition groups who oppose the tyranny of Assad and the brutality of the extremists.”

The DIA did not respond to request for comment.

Strategic asset for regime-change

Security analyst Shoebridge, however, who has tracked Western support for Islamist terrorists in Syria since the beginning of the war, pointed out that the secret Pentagon intelligence report exposes fatal contradictions at the heart of official pronunciations:

“Throughout the early years of the Syria crisis, the US and UK governments, and almost universally the West’s mainstream media, promoted Syria’s rebels as moderate, liberal, secular, democratic, and therefore deserving of the West’s support. Given that these documents wholly undermine this assessment, it’s significant that the West’s media has now, despite their immense significance, almost entirely ignored them.”

According to Brad Hoff, a former US Marine who served during the early years of the Iraq War and as a 9/11 first responder at the Marine Corps Headquarters in Battalion Quantico from 2000 to 2004, the just released Pentagon report for the first time provides stunning affirmation that:

“US intelligence predicted the rise of the Islamic State in Iraq and the Levant (ISIL or ISIS), but instead of clearly delineating the group as an enemy, the report envisions the terror group as a US strategic asset.”

Hoff, who is managing editor of Levant Report — ?an online publication run by Texas-based educators who have direct experience of the Middle East?—?points out that the DIA document “matter-of-factly” states that the rise of such an extremist Salafist political entity in the region offers a “tool for regime change in Syria.”

The DIA intelligence report shows, he said, that the rise of ISIS only became possible in the context of the Syrian insurgency?—?“there is no mention of US troop withdrawal from Iraq as a catalyst for Islamic State’s rise, which is the contention of innumerable politicians and pundits.” The report demonstrates that:

“The establishment of a ‘Salafist Principality’ in Eastern Syria is ‘exactly’ what the external powers supporting the opposition want (identified as ‘the West, Gulf Countries, and Turkey’) in order to weaken the Assad government.”

The rise of a Salafist quasi-state entity that might expand into Iraq, and fracture that country, was therefore clearly foreseen by US intelligence as likely?—?but nevertheless strategically useful?—?blowback from the West’s commitment to “isolating Syria.”

Complicity

Critics of the US-led strategy in the region have repeatedly raised questions about the role of coalition allies in intentionally providing extensive support to Islamist terrorist groups in the drive to destabilize the Assad regime in Syria.

The conventional wisdom is that the US government did not retain sufficient oversight on the funding to anti-Assad rebel groups, which was supposed to be monitored and vetted to ensure that only ‘moderate’ groups were supported.

However, the newly declassified Pentagon report proves unambiguously that years before ISIS launched its concerted offensive against Iraq, the US intelligence community was fully aware that Islamist militants constituted the core of Syria’s sectarian insurgency.

Despite that, the Pentagon continued to support the Islamist insurgency, even while anticipating the probability that doing so would establish an extremist Salafi stronghold in Syria and Iraq.

As Shoebridge told me, “The documents show that not only did the US government at the latest by August 2012 know the true extremist nature and likely outcome of Syria’s rebellion”?—?namely, the emergence of ISIS?—?“but that this was considered an advantage for US foreign policy. This also suggests a decision to spend years in an effort to deliberately mislead the West’s public, via a compliant media, into believing that Syria’s rebellion was overwhelmingly ‘moderate.’”

Annie Machon, a former MI5 intelligence officer who blew the whistle in the 1990s on MI6 funding of al-Qaeda to assassinate Libya’s former leader Colonel Gaddafi, similarly said of the revelations:

“This is no surprise to me. Within individual countries there are always multiple intelligence agencies with competing agendas.”

She explained that MI6’s Libya operation in 1996, which resulted in the deaths of innocent people, “happened at precisely the time when MI5 was setting up a new section to investigate al-Qaeda.”

This strategy was repeated on a grand scale in the 2011 NATO intervention in Libya, said Machon, where the CIA and MI6 were:

“… supporting the very same Libyan groups, resulting in a failed state, mass murder, displacement and anarchy. So the idea that elements of the American military-security complex have enabled the development of ISIS after their failed attempt to get NATO to once again ‘intervene’ is part of an established pattern. And they remain indifferent to the sheer scale of human suffering that is unleashed as a result of such game-playing.”

Divide and rule

Several US government officials have conceded that their closest allies in the anti-ISIS coalition were funding violent extremist Islamist groups that became integral to ISIS.

US Vice President Joe Biden, for instance, admitted last year that Saudi Arabia, the UAE, Qatar and Turkey had funneled hundreds of millions of dollars to Islamist rebels in Syria that metamorphosed into ISIS.

But he did not admit what this internal Pentagon document demonstrates?—?that the entire covert strategy was sanctioned and supervised by the US, Britain, France, Israel and other Western powers.

The strategy appears to fit a policy scenario identified by a recent US Army-commissioned RAND Corp report.

The report, published four years before the DIA document, called for the US “to capitalise on the Shia-Sunni conflict by taking the side of the conservative Sunni regimes in a decisive fashion and working with them against all Shiite empowerment movements in the Muslim world.”

The US would need to contain “Iranian power and influence” in the Gulf by “shoring up the traditional Sunni regimes in Saudi Arabia, Egypt, and Pakistan.” Simultaneously, the US must maintain “a strong strategic relationship with the Iraqi Shiite government” despite its Iran alliance.

The RAND report confirmed that the “divide and rule” strategy was already being deployed “to create divisions in the jihadist camp. Today in Iraq such a strategy is being used at the tactical level.”

The report observed that the US was forming “temporary alliances” with al-Qaeda affiliated “nationalist insurgent groups” that have fought the US for four years in the form of “weapons and cash.” Although these nationalists “have cooperated with al-Qaeda against US forces,” they are now being supported to exploit “the common threat that al-Qaeda now poses to both parties.”

The 2012 DIA document, however, further shows that while sponsoring purportedly former al-Qaeda insurgents in Iraq to counter al-Qaeda, Western governments were simultaneously arming al-Qaeda insurgents in Syria.

The revelation from an internal US intelligence document that the very US-led coalition supposedly fighting ‘Islamic State’ today, knowingly created ISIS in the first place, raises troubling questions about recent government efforts to justify the expansion of state anti-terror powers.

In the wake of the rise of ISIS, intrusive new measures to combat extremism including mass surveillance, the Orwellian ‘prevent duty’ and even plans to enable government censorship of broadcasters, are being pursued on both sides of the Atlantic, much of which disproportionately targets activists, journalists and ethnic minorities, especially Muslims.

Yet the new Pentagon report reveals that, contrary to Western government claims, the primary cause of the threat comes from their own deeply misguided policies of secretly sponsoring Islamist terrorism for dubious geopolitical purposes.

 

Dr Nafeez Ahmed is an investigative journalist, bestselling author and international security scholar. A former Guardian writer, he writes the ‘System Shift’ column for VICE’s Motherboard, and is also a columnist for Middle East Eye. He is the winner of a 2015 Project Censored Award, known as the ‘Alternative Pulitzer Prize’, for Outstanding Investigative Journalism for his Guardian work, and was selected in the Evening Standard’s ‘Power 1,000’ most globally influential Londoners.

Nafeez has also written for The Independent, Sydney Morning Herald, The Age, The Scotsman, Foreign Policy, The Atlantic, Quartz, Prospect, New Statesman, Le Monde diplomatique, New Internationalist, Counterpunch, Truthout, among others. He is the author of A User’s Guide to the Crisis of Civilization: And How to Save It (2010), and the scifi thriller novel ZERO POINT, among other books. His work on the root causes and covert operations linked to international terrorism officially contributed to the 9/11 Commission and the 7/7 Coroner’s Inquest.








Submitted by Mike Krieger via Liberty Blitzkrieg blog,

FBI agents can’t point to any major terrorism cases they’ve cracked thanks to the key snooping powers in the Patriot Act, the Justice Department’s inspector general said in a report Thursday that could complicate efforts to keep key parts of the law operating.

 

Inspector General Michael E. Horowitz said that between 2004 and 2009, the FBI tripled its use of bulk collection under Section 215 of the Patriot Act, which allows government agents to compel businesses to turn over records and documents, and increasingly scooped up records of Americans who had no ties to official terrorism investigations.

 

– From the Washington Times article: FBI Admits No Major Cases Cracked with Patriot Act Snooping Powers

Back in 2013, as debate about the Snowden revelations was at its zenith, I published a post titled NSA Chief Admits “Only One or Perhaps Two” Terror Plots Stopped by Spy Program. Here’s an excerpt:

The Obama administration’s credibility on intelligence suffered another blow Wednesday as the chief of the National Security Agency admitted that officials put out numbers that vastly overstated the counterterrorism successes of the government’s warrantless bulk collection of all Americans’ phone records.

 

Pressed by the Democratic chairman of the Senate Judiciary Committee at an oversight hearing, Gen. Keith B. Alexander admitted that the number of terrorist plots foiled by the NSA’s huge database of every phone call made in or to America was only one or perhaps two — far smaller than the 54 originally claimed by the administration.

 

“One or perhaps two.” Or perhaps zero. The guy has the nerve to say “perhaps.” How do you not know? What a bunch of lying assholes. How the heck does 54 turn into “one or two,” and I’ll tell you something else, I don’t believe the one or two figure for a minute. I mean there’s no way he would say “zero” when he is fighting to keep his petty little Stasi state intact. Furthermore, how about some details here. What was the one plot the NSA foiled? Some teenager throwing firecrackers on the White House lawn? These guys need to get lost already. From the Washington Times:

As time has passed and the years have gone by, it has become increasingly clear that the phone records collection program hasn’t stopped a single terror attack. In fact, a recently published report by the Justice Department’s inspector general admitted as much. This takes on increased significance with parts of the Patriot Act set to automatically sunset on June 1st.

The Washington Times reports:

FBI agents can’t point to any major terrorism cases they’ve cracked thanks to the key snooping powers in the Patriot Act, the Justice Department’s inspector general said in a report Thursday that could complicate efforts to keep key parts of the law operating.

 

Inspector General Michael E. Horowitz said that between 2004 and 2009, the FBI tripled its use of bulk collection under Section 215 of the Patriot Act, which allows government agents to compel businesses to turn over records and documents, and increasingly scooped up records of Americans who had no ties to official terrorism investigations.

 

Backers say the Patriot Act powers are critical and must be kept intact, particularly with the spread of the threat from terrorists. But opponents have doubted the efficacy of Section 215, particularly when it’s used to justify bulk data collection such as in the case of the National Security Agency’s phone metadata program, revealed in leaks from former government contractor Edward Snowden.

 

“The agents we interviewed did not identify any major case developments that resulted from use of the records obtained in response to Section 215 orders,” the inspector general concluded — though he said agents did view the material they gathered as “valuable” in developing other leads or corroborating information.

 

The report was heavily redacted, and key details were deleted. The entire chart showing the number of Section 215 requests made from 2007 through 2009 was blacked out, as was the breakdown of what types of investigations they stemmed from: counterintelligence, counterterrorism, cyber or foreign intelligence investigations.

Redacted indeed. This is what pages 16-20 look like, and the pages immediately after these are just as bad.

Screen Shot 2015-05-22 at 10.58.24 AM

Screen Shot 2015-05-22 at 10.58.41 AM

Screen Shot 2015-05-22 at 10.58.54 AM

Screen Shot 2015-05-22 at 10.59.07 AM

Screen Shot 2015-05-22 at 10.59.19 AM

Most transparent administration ever.

Moving along, the conclusion that Section 215 of the Patriot Act hasn’t stopped any terror attacks naturally won’t stop FBI director James Comey (and others) from fear-mongering. A favorite pastime of government officials and their lapdogs. As Politico reports:

Speaking at an American Law Institute event this week, FBI Director James Comey warned that a PATRIOT Act sunset would “severely” affect his agency. The FBI relies heavily on the soon-to-expire provisions of the law to obtain specific business records — from library records to gun ownership data — and wiretaps for multiple devices, he said.

 

“If I lose these tools, it’s a huge, huge problem,” Comey said. “We use [Section 215 to obtain specific records] fewer than 200 times per year, but when we use it, it matters tremendously.”

But not for terrorism, and the Patriot Act was specifically passed to deal with terrorism.

“ISIS is singing a siren song, calling people to their death to crash on the rocks — and it’s the rocks that ISIS will take credit for,” said Ron Hosko, president of Law Enforcement Legal Defense Fund and former assistant director of the FBI. “They’re looking for those who are disaffected, disconnected and willing to commit murder. So if we’re willing to take away tools, OK, congressman, stand behind it [and] take the credit for putting the FBI in the dark.”

Can you believe people like this exist, and that their insane rhetoric actually speaks to some people? Scary.

While the current debate about Section 215 of the Patriot Act is encouraging and necessary, it is extremely important to understand that this is just a tiny, potentially meaningless tip of the iceberg when it comes to unconstitutional government surveillance. As The ACLU’s Chris Soghoian explains courtesy of Schneier.com:

There were 180 orders authorized last year by the FISA Court under Section 215 — 180 orders issued by this court. Only five of those orders relate to the telephony metadata program. There are 175 orders about completely separate things. In six weeks, Congress will either reauthorize this statute or let it expire, and we’re having a debate — to the extent we’re even having a debate — but the debate that’s taking place is focused on five of the 180, and there’s no debate at all about the other 175 orders.

 

Now, Senator Wyden has said there are other bulk collection programs targeted at Americans that the public would be shocked to learn about. We don’t know, for example, how the government collects records from Internet providers. We don’t know how they get bulk metadata from tech companies about Americans. We don’t know how the American government gets calling card records.

 

So the 215 program that has been disclosed publicly, the 215 program that is being debated publicly, is about records to major carriers like AT&T and Verizon. We have not had a debate about surveillance requests, bulk orders to calling card companies, to Skype, to voice over Internet protocol companies. Now, if NSA isn’t collecting those records, they’re not doing their job. I actually think that that’s where the most useful data is. But why are we having this debate about these records that don’t contain a lot of calls to Somalia when we should be having a debate about the records that do contain calls to Somalia and do contain records of e-mails and instant messages and searches and people posting inflammatory videos to YouTube?

 

Certainly the government is collecting that data, but we don’t know how they’re doing it, we don’t know at what scale they’re doing it, and we don’t know with which authority they’re doing it. And I think it is a farce to say that we’re having a debate about the surveillance authority when really, we’re just debating this very narrow usage of the statute.

The battle to push back the American Stasi is just beginning.








StealthFlation.org

On the grave Greek question, it appears that the moment of truth is finally upon us.  After nearly four months of frenetic, fruitless and often feckless high level deliberations and negotiations, both sides remain essentially at an impasse, right where they started.  The technocrats in Brussels want to see their austerity driven reform program implemented unconditionally, and the idealogues in Athens have pledged to carry forward with a more enlightened approach to rescue their sinking society.

The Technocrats hold the purse strings, but the Ideologues hold the heart strings.  For what it's worth, that is typically a highly combustible combination, tick tock.  With their recent cocksure bravado are the Technocrats entirely misreading the desperate determination of the Idealogues?   Get ready for yet another Euro Summer swoon...........

Everyone agrees that Greece, under a corrupt political oligarchy, grossly abused its privileges as a Eurozone member.  In fact, with the help of a few sophisticated Goldman Sachs financiers, they actually cheated on their application forms in order to join the exclusive club to begin with.  The illegitimate Ionian books were cooked from the get go, and it only got worse and worse over time. The crafty self serving political elites and their self-seeking sponsors at multinational banks and corporations ran up a massive tab, while their ill-fated nation never had the fiscal wherewithal to pay the astronomical bills.   

That is essentially what happened here.  Oh, and the parties specifically involved all happened to get personally rather wealthy themselves along the way.

Check out the mess they left:

how much does Greece owe

Along with the privilege of leadership comes responsibility.  That clearly seems to have gone out the window here.

So, I have a simple question.  Why should the brunt of the demanded reforms fall on those least responsible for the mess, and most vulnerable?  Surely, the provincial woman on the streets of Athens pushing her Gyro cart up the steep hills of Kolonaki is far less at fault for the lamentable state of affairs her beloved country finds itself in, then those in the positions of leadership whom should have clearly known better.  Yet, today she is the one being asked to bear the burden of the terribly onerous predicament her Nation is suffering through.  Meanwhile, the bankers want more Euros, and no one is buying her Gyros.

Seems to me the wealthy Greek political class, the int'l financial establishment and the EU political leadership bear the lion share of the responsibility here.  Yet, instead of facing up to the mess they presided over and largely created, by putting forth workable resolutions to the debt death spiral effectively consuming Greece, what I have mostly witnessed over the past four months is that same establishment circling the wagons, doing everything in their power to delegitimize the SYRIZA leadership and further cripple their already stressed banking system.  I guess the best defense is a flat out offensive.  Is this what passes for inspired leadership in this day and age?

Also, do we really need these "free market" frauds to chime in on the difficult matter:

A Greek exit from the euro is just a matter of time and wouldn't lead to the breakup of monetary union, former Federal Reserve Chairman Alan Greenspan told Het Financieele Dagblad in an interview published Saturday. An exit could make the euro stronger, billionaire investor Warren Buffett said in an interview in the Euro-am-Sonntag newspaper.

I'm certainly no socialist, but if this is what today's crony capitalism spawns, I'm definitely not impressed.  

A telling quote from Jimi Hendrix's comes to mind.......

"When the power of love overcomes the love for power, only then will the world change."

When are we going to wake up?  It's high time for honest enlightened free market capitalism!  Enough of this crony capitalism crap already!   The entire financialized abominNation is a national disgrace.








As a reminder, Hillary is running for “everyday Americans.” Full requirement list:

The last time large speculators were as aggressively buying silver as last week was September 1997. The net long non-commercial positioning in Silver futures, according to the CFTC rose almost 22,000 contracts last week to a 3-month high (which is closing in on the 'longest' since 2005). Gold, not be out-precious'd also saw major buying. Net speculative longs in gold added over 45,000 contracts - the most since July 2005 - lifting net long positions to their highest in 3 months. Perhaps, just perhaps, as Alhambra's Jeffrey Snider notes, this is due to Yellen putting the 'dollar' back on suicide watch.

 

Large speculators increased Silver net long position to $4.4bn from $2.4bn notional.

 

Large speculators increased their net long gold exposure to $14.8bn from $9.2bn notional.

Charts: Bloomberg

Contrarian or not, perhaps Alhambra's Jeffrey Snider's view that Janet Yellen's contortions have put the dollar back on suicide watch are creeping into the market...

Volatility in UST trading declined a bit in the past few days, as treasury yields became far more settled intraday. While that breaks the exact duplication Monday and Tuesday this week traced from Monday and Tuesday last week, the past two weeks overall remain remarkably similar. And for all the noise, the ups and downs along the way, treasury yields haven’t much changed. That observation applies as far back as May 6, which means that for all the mess there isn’t any more clarity.

ABOOK May 2015 Dollar Turn UST 10sABOOK May 2015 Dollar Turn 5s10s Nominal

Far be it for UST’s to be trading sideways alone, it seems as if oil prices (front end) have fallen into the same. Adding oil to the discussion immediately frames this as relating to the state of the “dollar” in more recent weeks, which looks to be in sharp contrast to the period between March 18 (FOMC) and May 6. Nominal rates were rising rather steadily in those nearly two months right alongside oil prices.

ABOOK May 2015 Dollar Turn Oil

The eurodollar curve has also gone limp, as eurodollar futures trading has found an extremely narrow range also since May 6. This, too, marks a defined shift from the March 18 to May 6 period, meaning that UST credit, oil prices and eurodollar futures all likely share the same inflection.

ABOOK May 2015 Dollar Turn EurodollarsABOOK May 2015 Dollar Turn Eurodollars2

We can also add “inflation” breakevens, at least as far as a potential change dating to May 6. Breakevens had been rising rather steadily since January 15, which I still think was an indication of hedging for (against?) the next QE.

ABOOK May 2015 Dollar Turn Breakevens

These rates and prices are a broad enough survey, especially as unified by May 6, to at least entertain the suggestion about whether the “dollar” pause that began on March 18 has ended. That may be taking it too far at this moment, since there aren’t any actual and sustained moves in a countertrend, so it may be more reasonable to instead assume a at the very least a pause to the pause.

I think that notion is given further credibility by UST trading Wednesday in response to the FOMC statement; there really wasn’t any response. The same goes for eurodollars which seemed unperturbed by the almost dispirited desperation that the FOMC was trying to forward as a reasoned basis for whatever they might do. That, then, places far more emphasis on what might have occurred on May 6 to make such a unified impact in global money and credit markets.

That was the day that Janet Yellen made her belated wish that stock prices weren’t so winsome. She referred specifically to “potential dangers” due to “quite high” equity valuations, as well as reminding everyone of 2013’s “reach for yield” critique; i.e., asset bubbles. In terms of the idea that the FOMC may have changed its mind about ending ZIRP this is another factor that may have been missing to that point. I believe it was taken on March 18 that the FOMC then was projecting a change of heart based on “shocking” and “unexpected” economic weakness. Therefore, it was some initial hope that the economy alone would dispel the nervous urgency of Yellen et al to just get it over with.

However, Yellen’s curiously rather direct focus on the asset bubbles alters that dynamic, maybe significantly. There was always background noise in Bernanke’s last year (reach for yield) that the largest dangers were getting to be financial imbalances. The worry was that at some point it may not matter so much the economy as the Fed might find itself in the Chinese position where bubbles became the larger priority (by far) regardless of economic weakness. So Yellen’s May 6 monkey wrench might have brought that possibility back to the forefront, at least as far as some initial consideration.

Obviously, it hasn’t been taken as fixed income gospel yet, thus the sideways action lasting now a little over two weeks. This week’s FOMC statement did nothing at all to clear up any perceivable favor one way or the other. The utter mess of rationalizations could actually be taken as supporting both versions, hawkish and dovish; the continued allusion and even “official” recognition of some stark economic weakness and very little of organic trends to offset it, but also that the Fed may be excusing all that as still consistent in their view with the ending of ZIRP.

ABOOK May 2015 Dollar Turn FrancABOOK May 2015 Dollar Turn RealABOOK May 2015 Dollar Turn Gold

It isn’t completely clear either from other “dollar” proxies as to where bank balance sheets globally might be progressing. Again, there isn’t any sustained trend here to offer a more compelling interpretation, but enough of a muddle in which to accommodate the possibility of resumption toward tightening. Gold, for example, has been trading mostly sideways dating all the way back to late March. The Brazilian real devalued starting on April 28, and the Swiss franc at least stopped its ascendant run on May 6.

So these “dollar” and credit markets may not yet know what to do regarding Yellen’s version of “conundrum”, but it seems as if her introduction of complications has led to at least contemplation about it, tipping the scales, ever so slightly, back toward financial suicide.








In an attempt to frontrun even more draconian measures resulting from California's record drought, farmers in the state's Sacramento-San Joaquin River Delta who have California's oldest water rights proposed to voluntarily cut their water use by 25% to avoid the risk of even harsher restrictions by the state later this summer should the water situation deteriorate further. State officials promptly accepted the offer, even if it is ultimately moot since there is no way to enforce it.

California had not restricted water use for growers with the oldest, most established water rights since the 1970s, and the first in memory for the San Joaquin, which runs from the Sierra Nevada to San Francisco Bay. For many farmers, a fear that the worst is yet to come convinced them that they would be better off giving up water before they began planting for the season.

The Sacramento-San Joaquin River Delta

Gino Celli took a water sample to check the salinity in an irrigation canal that runs through his fields near Stockton, Calif., this week. Mr. Celli has senior water rights and draws his irrigation water from the Sacramento-San Joaquin River Delta.

The proposal was made by the so-called riparian water rights holders, who have the oldest and most secure access to California rivers. They proposed the unprecedented voluntary curtailment for one simple reason: "There is a threat that the state might try the unthinkable and tell us that we cannot use any of the water,” said Dennis Gardemeyer, a delta farmer who helped spur the deal. "I and almost everyone in the delta think that will result in all manner of lawsuits and they will not prevail, but there’s always that threat."

As AP reports, this is the latest water emergency conservation step undertaken by the state: previously Governor Jerry Brown has ordered communities throughout the state to reduce water use by 25 percent. State water officials have encouraged water users to propose conservation measures, drawing the proposal from farmers.

California's governor has been criticized for leaving farmers out of tightening regulations that force communities throughout the state to cut back on their water use. But this is the second consecutive year that junior water-rights holders have received orders to stop pumping river water to irrigate their crops.

The escalation is likely to have a substantial impact on US food prices over the summer: farmers would either take less river water for irrigation or leave a quarter of their crops unplanted. If the state accepts the deal, Delta water managers say it may become a model for farmers throughout California, who also are facing curtailments.

And since it is unclear where local farmers can find substitute water, it is likely that suddenly the supply of California plantings is about to decline by at least a quarter, leading to a dramatic spike in foor prices heading into the second half of the year.

One concern is that it is impossible to predict how many farmers will participate, said attorney Jennifer Spaletta, who represents several Delta growers, but those who do would be able to plan their crops earlier in the season with more certainty.

In any event, on Friday state officials accepted the offer. Cited by the NYT, Felicia Marcus, the chairwoman of the State Water Resources Control Board, said: “We’re in an unprecedented drought, and we have to exercise the state’s water rights in an unprecedented way. This is a breakthrough in what has long been a rhetorical battle. It’s a significant turning point to have people say, ‘We know this is complicated. We want to do something early in good faith that is a pragmatic solution for everyone.’”

 

The biggest problem is that just like European reforms where everyone promises much and delivers nothing, so there is absolutely no way to enforce the California proposal: regulators lack enough sensors, meters and other technology to make sure water isn't illegally diverted. Water rights curtailments are instead enforced by an honor system, complaints and field investigations.

And since to many farmers a drop in production may well mean a fast track into insolvency, one can anticipate just how efficient a system based on self-regulation will be. For a quick answer look at the recidivist criminal banks on Wall Street which are also "self regulated."

In other words, this "historic" announcement is very much moot, especially when one considers that less than 30% of the junior rights farmers, those who have already been ordered to cut water use for the second year in a row, have told the board they are complying.

A brief Q&A on how this historic move came about courtesy of AP:

WHY IS THIS HAPPENING?

California is in its driest four-year stretch on record. Winter provided little rain and snow to replenish rivers and streams, meaning there is not enough water to meet the demands of farms, communities and wildlife. The State Water Resources Control Board is monitoring conditions in rivers and streams across the parched state and deciding who gets to divert water. Even those with long-standing legal rights to water are under scrutiny.

WHAT ARE WATER RIGHTS?

The rights allow holders such as cities, irrigation districts serving farms, and corporations to take water directly from rivers and streams. The first to claim the water are the last to have supplies curtailed. Users who obtained rights to divert water after 1914 are the first to be cut off to ensure there is water for senior water rights holders with claims dating to the Gold Rush. Landowners with property that touches waterways have riparian rights — the strongest of the senior water rights.

WHAT'S ALREADY HAPPENED?

Thousands of farmers and others with more recent, junior water rights in the Sacramento and San Joaquin River watersheds have been ordered to stop diverting water for the second consecutive year. Less than 30 percent have told the board they are complying.

WHAT'S NEXT?

The board in the coming weeks plans to order those with claims to water in the San Joaquin River watershed dating before 1914 to stop pumping from rivers and streams. Riparian rights holders were scheduled to be curtailed by mid-June. Friday's order would be the first restriction on senior water rights holders since severe drought the late 1970s, and the first in memory for the San Joaquin, which runs from the Sierra Nevada to San Francisco Bay.

HOW IS THIS ENFORCED?

That's the challenge. Regulators lack enough sensors, meters and other technology to make sure water isn't illegally diverted. Water rights curtailments are instead enforced by an honor system, complaints and field investigations. Some curtailment orders are easily followed because there's no water to take from streams.

WHAT ARE RIGHTS HOLDERS DOING ABOUT THIS?

Senior water rights holders see their claims to water as ironclad after they paid top price for land with nearly guaranteed water in dry California. Some of their attorneys have threatened litigation, saying the water board has no authority over them. Other farmers with water rights in the Sacramento-San Joaquin River Delta are offering to voluntarily conserve 25 percent of their water in exchange for assurances that they won't face additional cuts in the middle of their growing season.

HOW IS THE STATE RESPONDING?

Thomas Howard, executive director of the State Water Board, says he'll announce by Friday whether to let riparian water rights holders take voluntary cuts to avoid curtailments. He says his decision hinges on whether the voluntary conservation would save enough water to reduce the strain on rivers and streams that are drying up. His decision would extend to waterfront property owners in the entire basin of the Sacramento River.








FBI agents can’t point to any major terrorism cases they’ve cracked thanks to the key snooping powers in the Patriot Act, the Justice Department’s inspector general said in a report Thursday that could complicate efforts to keep key parts of the law operating.

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